Proposed banking bill would modernize, standardize industry

KEITH ARNOLDSpecial to the Legal News
Published: August 14, 2017

To demonstrate just how outmoded portions of Ohio banking law are, the Republican lawmaker sponsoring a bill to update the section of the Ohio Revised Code noted that current law does not recognize the method by which most consumers complete bank transactions today.

"... Much needed updates address current-day advancements in areas such as electronic banking, which are not recognized by the current statute," Rep. Jim Hughes of Columbus told members of the House Financial Institutions, Housing and Urban Development Committee during testimony in support of House Bill 35.

Hughes said large parts of the current Ohio banking code are antiquated without update since the 1980s.

"This legislation, if enacted into law, would increase regulatory robustness within the state banking regulator, the Ohio Division of Financial Institutions, by condensing three chapters of the ORC into one and creating a new 'universal' charter that combines the strongest characteristics of the existing charters," the lawmaker said. "This, combined with streamlined governing boards, would also decrease overhead costs of examinations and training."

Currently three separate statutes independently govern commercial banks, savings and loan associations and savings banks, which causes unnecessary redundancy in some instances and a potential cause for conflict as bank and thrift business models have evolved.

Jeff Quayle, senior vice president and general counsel for the Ohio Bankers League, said the bill's goal is to help Ohio banks remain competitive and enable these institutions to provide enhanced products and services in a safe and sound manner for consumers.

"Merging these three chapters will offer more consistent oversight that will be easier to work with for all concerned and will have the practical impact of strengthening consumer protections," Quayle offered during proponent testimony. "This will in turn save the Department of Commerce and the industry in training, development and compliance costs."

Additionally, great care has been taken to preserve and strengthen the Ohio mutual charter in the bill, he said.

"These are a unique financial institution where the institution is owned not by investors, but by its depositors and borrowers," Quayle continued.

HB 35 would expand permissible investments in debt securities with the goal of mirroring the investments permitted to national banks or federal savings banks or savings associations.

The bill also would crack down on the misleading use of a bank name by giving the superintendent authority to charge a civil money penalty of up to $1,000 per day.

Other provisions include:

• The addition of language in corporate applications that notes Department of Financial Institutions approval is not an endorsement of a given proposal; and

• A measure to tighten up timeframes in which the superintendent must act on applications, such as mergers and acquisitions.

"The proposed legislation is an important step to help Ohio banks and their customers, while recognizing changes in the industry and tailoring regulatory oversight so it is consistent with the size and risk profile of Ohio institutions" Quayle concluded. "The industry has certainly changed substantially in recent years and the way in which banking products and services are brought to market has also been revolutionized through new technology."

With passage of the bill, Bankers League member institutions would be enabled to broaden their products and services while continuing to operate in a safe and sound manner, he said.

Thirteen fellow House members have signed on as co-sponsors of the bill, which had not been scheduled for a fourth committee hearing at time of publication.